AUD/USD risks extra weakness for the time being – UOB

The continuation of the downtrend seems a probable scenario for AUD/USD in the short-term horizon, suggest UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: Last Friday, we indicated that AUD “is under mild downward pressure” and while we expected it to trade lower, we were of the view that it “is unlikely to threaten the major support at 0.6700.” However, AUD broke below 0.6700 and plunged to a low of 0.6663. Not surprisingly, after the sharp and swift decline, conditions are severely oversold. However, as long as AUD stays below 0.6715 (minor resistance is at 0.6700), it could dip to 0.6650 before a more sustained rebound is likely. The next support at 0.6620 is highly unlikely to come under threat. 

Next 1-3 weeks: We shifted from a positive to neutral stance in AUD last Wednesday (21 Jun, spot at 0.6790) and we held the view that AUD “is likely to trade in a range between 0.6700 and 0.6880 for now.” We did not expect the sharp selloff on Friday as AUD plunged by 1.14% (NY close of 0.6680), its biggest 1-day drop since early March. Further AUD weakness appears likely but the sharp decline appears to be running ahead of itself and it might take a while before 0.6620 comes into view. In order to maintain the rapid buildup in momentum, AUD must stay below the ‘strong resistance’ level, currently at 0.6755.